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June 2, 2011

Starbucks Signs Joint Venture in China

Company will control 100% equity in many mainland China areas

The world's largest coffee chain has come to the world's second-largest economy, China, in a big way. Starbucks has signed a joint venture agreement with Maxim's Caterers Ltd., its partner in South China, that will give the American coffee company 100% equity in more than half of its retail stores in the Chinese provinces of Guangdong, Hainan, Sichuan, Shaanxi and Hubei, and the municipality of Chongqing.

John Culver, president of Starbucks Coffee International, said in a statement, "Full ownership of our stores in Central, South and Western China is part of our broader strategy to build China as our second home market outside of the U.S."

The joint venture move is part of a strategy by Starbucks to expand into China in a big way: by 2015, the company plans to have 1,500 stores open in mainland China. That country has not been subject to the coffee price increases Starbucks recently put in place in its U.S. and Canadian stores after the price of coffee soared to a 34-year high. Starbucks' own stores in the U.S. were warned in May of a 17% price hike that will take effect July 12; grocery stores have already seen a price increase of 12%, initiated by the chain in March. Canadian Starbucks stores have only been subject to a 6% price increase.

The company says it has no plans thus far to raise prices in other countries, according to spokesman Alan Hilowitz.

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